WASHINGTON 鈥� Conservatives anxious to counter America's leading economic adversary set their sights on a top trade priority for labor unions and progressives: cracking down on the deluge of duty-free packages coming in from China.
The changing political dynamic could have major ramifications for e-commerce businesses and consumers importing products from China valued at less than $800. It also could add to the growing tensions between the countries.
Under current U.S. law, most imports valued at less than $800 enter duty-free into the United States as long as they are packaged and addressed to individual buyers. It's referred to as the de minimis rule. Efforts to lower the threshold amount or exclude certain countries altogether from duty-free treatment are set to become a major trade fight in this Congress.
"De minimis has become a proxy for all sorts of anxieties as it relates to China and other trade-related challenges," said John Drake, a vice president at the U.S. Chamber of Commerce, who argues that the current U.S. law should be preserved.
The rule speeds the pace of commerce and lowers costs for consumers. It also allows U.S. Customs and Border Protection to focus its resources on the bigger-ticket items that generate more tariff revenue for the federal government.
Congress raised the U.S. government's threshold for expedited, duty-free treatment from $200 to $800 in 2016. The volume of such imports rose from about 220 million packages that year to 771 million in 2021 鈥� with China accounting for about 60%, according to the government 鈥� and 685 million last year.
"I think everybody's got to kind of wrap their head around what kind of mistake this was," Robert Lighthizer, the former U.S. trade representative during the Trump administration, told a House panel last month. "Nobody dreamt this would ever happen. Now we have packages coming in, 2 million packages a day, almost all from China. We have no idea what's in them. We don't really know what the value is."
Lighthizer urged Congress to get rid of the de minimis rule altogether, or take it to a much lower amount, say $50 or $100. He said foreign companies are taking advantage of the "loophole" and "putting people out of work in stores, they're putting people out of work in manufacturing."
Last year, House Democrats pushed to prohibit Chinese-made goods from benefiting from the special treatment for lower-cost goods. That move was part of a larger measure that boosted investments in semiconductor manufacturing and research.
In the rush to pass a bill before the 2022 elections, the Biden administration and Democratic leaders jettisoned provisions that had no bipartisan buy-in. Important U.S. business groups and key Republican members of Congress opposed the trade provision, so it didn't make the final bill.
It's clear the political dynamic shifted 鈥� and quickly.
In its first set of recommendations, a new House committee focused exclusively on China called for legislation that would reduce the threshold for duty-free shipments into the U.S. with a particular focus on "foreign adversaries, including the (People's Republic of China.)"
The Select Committee on the Chinese Communist Party said exploiting the $800 threshold may be a major avenue through which Chinese companies selling directly to American consumers can circumvent U.S. laws designed to prevent the sale of goods made with forced labor. The committee also said Customs and Border Protection "could not reasonably scrutinize" goods sent under the $800 threshold for forced labor concerns because of the sheer amount of products coming in.
The committee is most concerned about retailers Temu and Shein. In a report released Thursday, it said the two companies alone are likely responsible for more than 30% of all de minimis shipments entering the U.S. each day聽鈥� nearly 600,000 a day last year.
The committee also has competitiveness concerns. It points out that U.S. retailers such as Gap and H&M paid $700 million and $205 million in import duties, respectively, in 2022. In contrast, virtually all goods sold by Temu and Shein are shipped using the de minimis exception in which the importer pays no duty.
The Republican leading the House Ways and Means Committee, Rep. Jason Smith of Missouri, said he wants to "have a lot of conversations" about the $800 threshold.
"Basically, when you're looking at $800 or less, that's a free-trade agreement with anyone. And you're looking at millions of products that come in per day," Smith said. "We need to look at it."
Meanwhile, senators introduced聽some bills on the issue this month.
One, from Sens. Sherrod Brown, D-Ohio, and Marco Rubio, R-Fla., would prevent the expedited, tariff-free treatment of imports from certain countries, most notably China and Russia.
The other, from Sens. Bill Cassidy, R-La., and Tammy Baldwin, D-Wis., not only similarly targets China and Russia, but would affect other trade partners. It would do so by reciprocating the threshold for duty-free treatment to amounts other nations use.